The Somerset-based firm revealed r etail sales went into reverse in the crucial festive trading period, down 7% in the eight weeks to January 25 as it lost out in hefty discounting in the UK.

Its trading troubles were compounded by disappointing wholesale orders in South Korea - its largest Asian market - with the group admitting trading in the country had been "significantly" more challenging than expected.

Shares plunged 22% after the alert, which follows a tough couple of years for the group, which has suffered falling profits and was left reeling by the departure of its renowned creative director Emma Hill last autumn.

Mulberry is still searching for a replacement for Ms Hill, who was credited with turning the firm from a trusted briefcase and wallet maker into an international fashion powerhouse with a clutch of celebrity fans.

Chief executive Bruno Guillon said: "Due to tough trading conditions over the Christmas period which saw significant discounting across the market, Mulberry has experienced lower than expected UK retail sales which, together with wholesale order cancellations from Korea, will adversely impact our profit this year."

Sales rose by 3% in the nine weeks to November 30, but fell sharply in the following eight weeks to leave the figure 3% lower overall in the first 17 weeks of its second half.

The figure includes international sales, which rose 40% in the period, implying a far steeper decline in the UK.

It added that order cancellations in Korea were expected to be significant and were likely to leave wholesale revenues around 10% lower over the year to March 31, which would see overall annual revenues remain flat.

The group joined other retailers such as Debenhams and Mothercare in warning over profits after a disappointing Christmas.

But one of its closest rivals - luxury good groups Burberry - was able to offset difficult high street conditions thanks to soaring demand in China and a burgeoning online business, which sent its festive sales 12% higher.

Analysts had expected Mulberry to post pre-tax profits of £26.9 million for the year to March 31, against £26 million a year earlier.

The warning means Mulberry will see another year of falling profits, which slumped by more than a quarter in the 12 months to last March.

One of Britain's export success stories, Mulberry's fortunes have been hit by tougher conditions in Asia and in its domestic UK market, which still accounts for more than 60% of trade.